5 Stocks Under $10 Set to Soar - views

Delafield, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for $10 a share or less don't experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.

Just take a look at some of the big movers in the under-$10 complex from Thursday, including NewLead (NEWL), which is exploding higher by 39%; Chelsea Therapeutics (CHTP), which is skyrocketing to the upside by 31%; EnGlobal (ENG), which is ripping higher by 26%; and Ampio Pharmaceuticals (AMPE), which is trending higher by 21%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, breakout candidates and low-priced stocks that are acting technically bullish. I like to hunt for low-priced stocks that are showing bullish price and volume trends, since that increases the probability of those stocks heading higher. These setups often produce monster moves higher in very short time frames.

When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.

One under-$10 biopharmaceutical player that's starting to move within range of triggering a near-term breakout trade is Synta Pharmaceuticals (SNTA), which focuses on the discovery, development and commercialization of small molecule drugs for treating severe medical conditions, including cancer and chronic inflammatory diseases. This stock has been hit hard by the sellers so far in 2014, with shares down by 20%.

If you take a look at the chart for Synta Pharmaceuticals, you'll notice that this stock has been trending sideways and consolidating for the last two months, with shares moving between $3.91 on the downside and $4.47 on the upside. Shares of SNTA are starting to spike higher here just above that $3.91 low and it's beginning to move within range of triggering a breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in SNTA if it manages to break out above some near-term overhead resistance levels at $4.30 to $4.40 a share and then once it clears more resistance levels at $4.47 to its 50-day moving average of $4.54 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 2.57 million shares. If that breakout triggers soon, then SNTA will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $5.46 to $5.51 a share. Any high-volume move above those levels will then give SNTA a chance to tag $6 to $6.50 a share.

Traders can look to buy SNTA off weakness to anticipate that breakout and simply use a stop that sits right below its recent low of $3.91 a share. One can also buy SNTA off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Forest Oil

Another under-$10 stock that's starting to trend within range of triggering a big breakout trade is Forest Oil (FST), which is engaged in the acquisition, exploration, development and production of oil, natural gas and natural gas liquids primarily in North America. This stock has been hammered lower by the bears so far in 2014, with shares off sharply by 35%.

If you take a glance at the chart for Forest Oil, you'll see that this stock gapped up huge on Tuesday back above its 50-day moving average with monster upside volume after the company reported earnings. That gap pushed shares of FST into breakout territory, since the stock took out some key near-term overhead resistance at $2.03 a share. Shares of FST are now starting to move within range of triggering another big breakout trade above some key near-term overhead resistance.

Market players should now look for long-biased trades in FST if it manages to break out above some key near-term overhead resistance at $2.50 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average volume of 5.90 million shares. If that breakout materializes soon, then FST will set up to re-fill some of its previous gap-down-day zone from February that started near $3.30 a share. If FST fills that gap with strong upside volume, then this stock could easily tag $3.70 to $3.90 a share.

Traders can look to buy FST off weakness to anticipate that breakout and simply use a stop that sits right around $2 a share. One can also buy FST off strength once it takes out $2.50 a share with strong upside volume and then simply use a stop that sits a comfortable percentage from your entry point.

Zagg

One under-$10 specialty retail player that's starting to move within range of triggering a major breakout trade is Zagg (ZAGG), which designs, produces and distributes mobile accessory solutions. This stock is up nicely over the last six months, with shares higher by just over 14%.

If you take a look at the chart for ZAGG, you'll see that this stock is spiking higher today and trending back above both its 200-day and 50-day moving averages. Shares of ZAGG are also starting to enter breakout territory, since the stock has traded above some near-term overhead resistance at $4.51 a share. That move is quickly pushing shares of ZAGG within range of triggering a much bigger breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in ZAGG if it manages to break out above some near-term overhead resistance levels at $4.73 to $4.80 a share and then once it takes out some past resistance at $4.95 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 410,257 shares. If that breakout starts soon, then ZAGG will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $5.93 a share.

Traders can look to buy ZAGG off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $4.18 to $4.17 a share. One can also buy ZAGG off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

RadioShack

Another under-$10 electronic stores player that's starting to trend within range of triggering a big breakout trade is RadioShack (RSH), which is engaged in the retail sale of consumer electronics goods and services. This stock has been destroyed by the bears so far in 2014, with shares off sharply by 44%.

If you look at the chart for RadioShack, you'll see that this stock has recently formed a double bottom chart pattern at $1.28 to $1.31 a share. This bottom is coming after shares of RSH downtrended badly over the last two months, with shares falling from its high of $2.79 to its recent low of $1.28 a share. Shares of RSH are now starting to rebound off those recent lows and it's quickly moving within range of triggering a major breakout trade above some key near-term overhead resistance levels.

Market players should now look for long-biased trades in RSH if it manages to break out above its intraday high of $1.45 to some more near-term overhead resistance at $1.50 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 3.43 million shares. If that breakout hits soon, then RSH will set up to re-test or possibly take out its next major overhead resistance levels at $1.70 to $1.80 a share, or even its 50-day moving average of $1.95 a share.

Traders can look to buy RSH off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support zones at $1.31 to $1.28 a share. One can also buy RSH off strength once it starts to move above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Sonus Networks

One final under-$10 communication equipment player that's starting to trend within range of triggering a big breakout trade is Sonus Networks (SONS), which provides networked solutions for communications service providers and enterprises. This stock has been trending higher over the last six months, with shares up around 11%.

If you take a glance at the chart for Sonus Networks, you'll see that this stock is spiking higher today back above its 200-day moving average of $3.27 a share. This spike higher is starting to push shares of SONS within range of triggering a big breakout trade above a key downtrend line. A break above that key downtrend line resistance could send shares of SONS soaring since the stock will clear both its 200-day and 50-day moving averages and potentially push the stock out of its recent downtrending chart pattern.

Traders should now look for long-biased trades in SONS if it manages to break out above its 50-day moving average at $3.40 a share and then once it clears more near-term overhead resistance levels at $3.46 to $3.58 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.80 million shares. If that breakout kicks off soon, then SONS will set up re-test or possibly take out its next major overhead resistance levels at $3.78 to its 52-week high at $3.98 a share.

Traders can look to buy SONS off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.11 a share. One can also buy SONS off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.